How to Become Licensed, Bonded and Insured

by Jason Brick - Updated September 26, 2017

"Licensed, Bonded and Insured" looks nice, reassuring and professional on a business card or in a phone book advertisement. However, few people are sure what this means and what the difference is between the terms. A successful business in some industries must be all three, while other businesses can exist without any of them.

Getting Licensed

Confirm that you must have licenses to do business in your industry in your area. Check with your city government to find out about a business license, and with your state regulating agency to find out if you need an industry certification like an insurance or electrician's license.

Complete all education and practical experience necessary to get a license in your industry. Some licenses, such as insurance licenses, take two weeks and a few hundred dollars. Other licenses, such as an architecture license, require years of formal education and on-the-job training. Complete all necessary licensing requirements before taking any other steps in starting your business.

Apply for an Emplyer ID Number with the IRS. You can do this via mail or use their web-based application.

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Apply with your state Secretary or State register your business with the state. This sets you up legally for paying appropriate taxes and protects your business name from competitors using it without your permission.

Apply for a business license with your city.

Wait until all your licenses are approved and you have received the appropriate certificates before you begin accepting work.

Getting Bonded

Confirm that your company needs bonding. A bond is a policy that will pay your customers if you do a job poorly or incompletely, or if you or an employee steals from the customer. Some service companies require bonding, but many other industries do not. If your business model doesn't need bonding, skip the rest of these steps.

Gather information about your business and employees. Information you'll need include business address, ID numbers from the federal and state governments, Social Security numbers and driver's license numbers from all employees and basic numbers from your business income. If you don't yet have business history, you'll be asked to provide reasonable projections.

Shop at least three business insurance companies to find the best price for a bond. Compare the coverage limits from each policy, the policy premiums and the reputation of the company. Choose one company based on those factors.

Submit to a background check as part of the bonding process. Be prepared to explain any problems on your credit or criminal record or on the records of your employees. You may need to restrict or even let go employees with criminal histories in order to get approved for the bond.

Make your first premium payment, then review your policy paperwork once it arrives in the mail.

Getting Insured

Determine what kinds of insurance your company needs to operate. Liability insurance is necessary for most businesses.

Gather the information you'll need to set up appropriate insurance policies. In most cases, this is the same information you gathered to get bonded.

Shop three different insurance companies to get quotes on policies. Check with the company where you got your bond, as many companies offer "multiple policy discounts."

Choose an insurance company based on the factors from step three. Make your first premium payment and review the insurance documents to confirm you've paid for what you thought you did.


  • "Exam Cram: Property and Casualty"; Bisys Educational; 2006
  • "Small Business For Dummies"; Eric Tyson; 2009

About the Author

Jason Brick has written professionally since 1994. His work has appeared in numerous venues including "Hand Held Crime" and "Black Belt Magazine." He has completed hundreds of technical and business articles, and came to full-time writing after a long career teaching martial arts. Brick received a Bachelor of Arts in psychology from the University of Oregon.

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